SA is a laggard in the growing world of impact investing

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This is an opportune time to explore alternative sources of return, such as those found in the real economy in infrastructure and private equity and debt

SA has more than its fair share of challenges, perhaps most acutely captured for the 40% of people between the ages of 15 and 64 years who are not employed, or in education or training.

So, addressing the contribution we can make as investors is a critical aspect of both the sustainability conversation and a future-focused approach to investing. Despite regulation 28 enabling at least 35% of allocations towards private markets , our research shows that SA investors allocate only about 2% of their assets to alternatives. This is well below international norms of 10%-20%. Add to this a further two largely overlooked factors, and SA portfolios are relatively underexposed to our real economy.

However, this would seem an opportune time to explore alternative sources of return, such as those found in the real economy in infrastructure and private equity and debt. This offers potentially positive inflation-linked opportunities for diversification benefits in asset classes that are relatively uncorrelated and still provide attractive valuations.

The country’s first job-creation fund — the Jobs Fund — was underpinned by a guarantee from the Treasury and has now created more than 10,000 permanent and decent jobs while generating consistent benchmark-beating returns. But we need many more such impact funds to be demanded by our financial industry.

 

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